Borse Dubai vs Doha Securities Market

In the financial realm, it was the struggle of 2007: Dubai and Qatar locked horns over stakes in major Western stock exchanges. The duel, that only ended a month ago, has been symptomatic of each country’s ambitions. With oil (for Dubai) and gas (for Qatar) money flowing in abundantly, the two sheikhdoms are both preparing for the post-oil era and are vying to become the region’s financial hub as part of their ambitious diversification programs.

Local and international

The Doha stock market known as DSM (Doha Securities Market) was opened to investors in May 1997. Boosted by the establishment of the Qatar Financial Center and the modernization of financial regulations in 2005, it now has 43 companies listed on its index. Locally, the DSM is pretty dynamic; it surged by around $33 billion in just five months. But it relies heavily on local public companies, with Qatar Telecom, Qatar National Bank and Industries Qatar accounting for half of its capitalization.

But that’s definitely not enough to court global players. First, listed companies are legally required to go through brokers as they can’t trade by themselves. Also, while a number of international companies might be interested in listing in Qatar, thanks to its rising gas revenues (Qatar’s gas exports are expected to triple by 2012), the number of foreign companies allowed to trade on the DSM is limited to 25 percent of total listings (a share that Qatar’s cabinet is planning to increase to 49 percent).

So the opening of the Dubai International Financial Exchange (DIFX) in September 2005, with regulations modeled on those of the London Stock Exchange was supposed to be an answer to such concerns. The DIFX only managed to secure a handful of top international listings among its 45 listed companies in two years, and so, the emirate launched holding company Borse Dubai in August 2007. This consolidated the DIFX and the relatively quiet Dubai Financial Market (launched in 2000), in line with the 2015 Dubai Strategic Plan. “Given the rapid transformation of capital markets around the world, it was the right time to jointly build on the synergistic opportunities provided by both exchanges and to create Borse Dubai as a platform for further growth,” said Borse Dubai chairman Essa Kazim.

In November 2007, Dubai turned to British PR company Peregrine Communications to help promote it as “the default lead exchange” in the Middle East and improve its communication in the UK and US.

“Like Dubai, Qatar wants to be the Arabian financial center when the oil stops flowing,” Keith Fiztgerald, investment director at Money Morning said last year. “The problem is that they’re about 10 years behind the 8-ball when it comes to keeping up with Dubai. That could change, however, should Qatar be able to acquire a controlling stake in a major European bourse, and it would be even better in Qatar’s eyes should they be able to slow down Dubai at the same time.” Which is exactly what happened last September.

Cross-border deals

The two stock exchanges’ rivalry was laid out in the open last summer, in a flurry of financial attacks and counter-attacks- the two countries had been fighting over key footholds in major international financial places: the London Stock Exchange (LSE) and New York-based Nasdaq Stock Market.

Borse Dubai and Nasdaq were about to reach a complex $6.5 billion strategic deal- it would grant the Dubai borse a 20 percent ownership in an American rival, and its 28 percent stake of the LSE. In return, Nasdaq would take a substantial stake in DIFX, and would acquire Borse Dubai’s shares in Nordic OMX exchange, a European market that has developed trading software used at 60 bourses around the world. “Our primary objective is to build a world-class, growth-oriented exchange out of Dubai and to become the center for capital markets activities in the emerging markets,” said Kazim at the time.

But this win-win agreement was upset when the Qatar Investment Authority suddenly stepped in by snapping up 20 percent (which later became 24 percent) of the London market and 10 percent of OMX (in which it had previously shown no interest), forcing Dubai to raise its offer by $700 million.

“Qatar is a clone of Dubai,” said Haissam Arabi, managing director for Shuaa Capital PSC, to Bloomberg.com. “They have taken their lead from Dubai on most fronts [...] And now as financial centers, Dubai moved and Qatar followed.”

In fact, this move allowed Qatar to verify it could muster enough clout to challenge Dubai and more importantly, to reap international exposure for the Qatari companies listed on the DSM.

A Nasdaq-Borse Dubai deal was finally inked by end February 2008 (after Qatar sold its OMX stakes to Borse Dubai, and Dubai sold it to Nasdaq), giving the New York market a 33.3 percent stake in the DIFX. While Borse Dubai holds a 20 percent stake in the LSE, the latter ruled out any agreement between the two, with one of its executive telling Emirates Business, “We having nothing against Dubai, but they must believe Nasdaq can do a better job for them. They have chosen to ally themselves with Nasdaq, which is a major competitor to LSE. They cannot do a deal with both of us.”

LSE also signed an alliance with Qatar ( it currently owns 15 percent of LSE) earlier this year, which includes the use of its technology to help Qatar compete with its rival. In short, business is only getting started.